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Unit-2-Linear Regression-R1

This document covers the fundamentals of linear regression, including its objectives, use cases, and the distinction between correlation and regression analysis. It explains how regression analysis predicts dependent variables based on independent variables and discusses the simple linear regression model and the least squares method. Additionally, it highlights applications in fields such as real estate, demand forecasting, and medical analysis.

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VANSHIKA GADA
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25 views21 pages

Unit-2-Linear Regression-R1

This document covers the fundamentals of linear regression, including its objectives, use cases, and the distinction between correlation and regression analysis. It explains how regression analysis predicts dependent variables based on independent variables and discusses the simple linear regression model and the least squares method. Additionally, it highlights applications in fields such as real estate, demand forecasting, and medical analysis.

Uploaded by

VANSHIKA GADA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Unit 2:

Linear Regression
Objectives
▪ How to use regression analysis to predict the value of a dependent
variable based on a value of an independent variable
▪ To understand the meaning of the regression coefficients b0 and b1
▪ To evaluate the assumptions of regression analysis and know what to
do if the assumptions are violated
▪ To make inferences about the slope and correlation coefficient
Use Cases
• Real Estate: Residential home prices as a function of the homes living
area
• Demand Forecasting: Business and Governments can use linear
regression models
• Medical: A linear regression model can be used to analyse the effect
of a proposed radiation treatment on reducing tumour size
Correlation vs. Regression
▪ A scatter plot can be used to show the relationship
between two variables
▪ Correlation analysis is used to measure the strength of the
association (linear relationship) between two variables
▪ Correlation is only concerned with strength of the relationship
▪ No causal effect is implied with correlation
Regression Models
Types of Relationships
Introduction to Regression Analysis
▪ Regression analysis is used to:
▪ Predict the value of a dependent variable based on the value of at least one
independent variable
▪ Explain the impact of changes in an independent variable on the dependent
variable
▪ Dependent variable: the variable we wish to
predict or explain
▪ Independent variable: the variable used to
predict or explain the dependent variable
Simple Linear Regression Model

• Only one independent variable, X


• Relationship between X and Y is described by a linear function
• Changes in Y are assumed to be related to changes in X
Types of Relationships
Simple Linear Regression
(Only one independent variable).
Application of LR-Simple LR
Dependent and Independent Variable
Profit Estimation of a Company(Multiple
independent variables)
Simple Linear Regression
Simple Linear Regression Model
Simple Linear Regression Prediction Equation
y=c+mx
The Least Squares Method
b0 and b1 are obtained by finding the values that minimize the sum of
the squared differences between Y and Y ^

min  (Yi −Ŷi ) = min  (Yi − (b0 + b1Xi ))


2 2
Example-Linear Regression
Linear Regression

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